Imagine: you’ve been injured and head to the hospital for treatment. You know your insurance will cover your medical bills – until you submit your first big claim and the insurance company tries to retroactively void your insurance in order to avoid payment! It sounds shocking, but it’s more common than ever – and post-claims underwriting is a big problem for California residents.
Post-claims underwriting occurs when an insurer illegally cancels a policy after the filing of a claim. It’s an excuse not to pay, but it’s also against the law: in fact, insurance policies can only be canceled under certain specific circumstances, such as failure to pay premiums or violations of the terms found in the “Cancellation” section of the policy or proof of willful misrepresentations upon initial application for a policy.
In California, post-claims underwriting is prohibited by the California Health and Safety Code (Section 1389.3), which provides that “’post-claims underwriting’ means the rescinding, canceling, or limiting of a plan contract due to the plan’s failure to complete medical underwriting and resolve all reasonable questions arising from written information submitted on or with an application before issuing the plan contract.” This law is intended to protect California consumers from bad-faith rescission of their insurance policies by predatory insurance companies that do not wish to pay the fees they agreed to at the outset of coverage. However, companies such as Blue Cross, Kaiser, Blue Shield, Health Net, and PacifiCare have allegedly violated this regulation in California; multiple investigations, health insurance lawsuits, and even class-action lawsuits have followed.
Insurance companies generally target individual policies; at-risk policies include those for self-employed or freelance workers or those who are supplementing or replacing unavailable coverage from their employers. If you have group insurance, your risk is lower. Those who have group insurance in California (through their employer, for example) are protected by a different set of laws that require health insurance companies provide group policies without regard for pre-existing conditions. If you purchase health insurance individually (not through a group), you can keep your risk for retroactive rescission low – and the legal headaches that follow – by accurately disclosing any pre-existing medical conditions upon application and knowing your rights.
The effects of post-claims underwriting can be enormous and devastating. Unfortunately, too many consumers accept a retroactive rescission of their policy without asking questions and are left without coverage or legal recourse. If your insurance company contacts you with an offer of premium money or documents to sign to finalize cancellation of coverage, do not act! Instead, contact an experienced insurance attorney before signing any forms or cashing any checks. The assistance of an experienced California insurance attorney can be priceless as you negotiate the tricky legal waters of post-claims underwriting – and can give you some legal muscle against the expensive legal departments of big insurers.
